AIN Blog: Is President Obama Really Calling the Bizav Industry 'Bad'?

President Obama has taken some flak from bizav lobby groups for 'disparaging' business aviation.

Virtually every industry and profession in America enjoys the backing of an association and its lobbyists. And it doesn’t matter whether those lobbyists represent funeral directors, textile manufacturers, dairy farmers or dental consultants. They’re all banging on Congress’s door with the same message: Our association’s members play a vital role in this economy, create jobs, provide important products or services and deserve every possible tax break.

Sometimes, the fervor of these lobbying groups results in messages that sound a bit fanciful, such as when the National Air Transportation Association encouraged President Obama and Mitt Romney to focus in their October 16 debate on “the invaluable services that the general aviation community provide to the U.S. and global economy now and moving forward.” Can you imagine Obama or Romney ever saying, “Before I answer that question about Afghanistan [or abortion or unemployment or whatever], let me just take a minute to highlight the invaluable services that the general aviation community provides”? Not gonna happen.

Still, I’m not surprised when business aviation associations issue statements like NATA’s. Lobbying groups earn their keep by vigorously promoting the interests of the professions and industries they represent. That’s their job.

Occasionally, though, their defenses extend beyond the fanciful to the slightly ridiculous. That’s what I think happened after the first presidential debate of 2012, during which Obama suggested that we stop giving tax breaks to companies that are doing well. As he has in the past, the president cited oil companies and businesses that operate corporate jets as examples. Regarding the latter, his comment in full was as follows: “Why wouldn’t we eliminate tax breaks for corporate jets? My attitude is if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.”

Judging by the reaction of the National Business Aviation Association and other industry leaders, you’d think the president had called everyone in bizav a crook. Based solely on the two sentences quoted above, NBAACEO Ed Bolen said the president had “disparaged” the industry, “completely mischaracterized” it, “vilified” it and “denigrated” it. JSSI chairman Lou Seno chimed in, calling Obama’s comment an “attack on business aviation” by someone who “does not understand how business is conducted, both in the U.S. and around the world.” Retired Cessna CEO Jack Pelton, meanwhile, said, “We cannot continue to be reflected by the president as an industry that is ‘bad.’”

Granted, this is a complicated issue—more complicated than the prose that typically issues from either lobbyists or presidential candidates—and nobody’s 100-percent right or wrong. On the one hand, it’s probably time for the president to find new examples of tax breaks that ought to be eliminated. Ending breaks for business aircraft—an apparent reference to bonus depreciation, which was part of the stimulus package Obama himself signed—wouldn’t exactly do much to deflate the national debt. And Obama does make inordinate mention of business aviation in this context, probably because research has shown “corporate jets” to be a phrase that conjures up the ultra-rich among undecided voters.

But Republicans have their catch phrases too, some of which also promote rather inaccurate images. And the reality about corporate jets is probably somewhere between what these undecided voters imagine and what the business jet industry wishes they would envision. As the editor who put together a special issue of Business Jet Traveler called “The Bizav Advantage,” I fully understand that business jets are not used primarily to transport the wealthy from playground to playground; they’re employed by lots of executives and middle managers to boost efficiency and productivity. But let’s get real. Off the top of my head, I can’t think of any poor people who own business jets, nor am I even aware of any struggling businesses that are out shopping for jets at the moment. The companies that are buying and operating aircraft in this or any other economy tend to be the ones that are doing better than most. In fact, studies cosponsored by NBAA have repeatedly suggested exactly that. It’s questionable how many of these companies would actually forgo jet purchases just because the tax break went away.

Moreover, as I noted in a blog post last year, there are other reasons why the elimination of bonus depreciation for business aircraft buyers might not do significant harm to the industry or the economy. As BJT tax columnist Jeff Wieand has noted, for example, bonus depreciation could ultimately result in higher aircraft prices. Also, the companies that manufacture many of the business jets sold in the U.S. are based outside our borders. As such, a tax break for purchase of their aircraft does little to help the American economy.

All that said, sensible counterarguments exist and I can understand why some people believe corporate jet buyers should receive a special depreciation deduction. That’s a reasonable position. What’s not reasonable, it seems to me, is suggesting that anyone who disagrees about this is denigrating, vilifying and disparaging business aviation. Advocating elimination of an industry’s tax break is just not the same as calling that industry “bad.”

Comments

Lance (not verified)

October 18, 2012 - 2:26pm

What is not reasonable about the current administration's rhetoric toward corporate aviation is that their messages reinforce an inaccurate image of the corporate traveler as a fat cat with extra money to blow. What is denigrating, vilifying and disparaging is the notion that a corporate aircraft is not worthy of being called a business asset, like a building or a corporate car, which is the bottom line here. It is an asset and provides huge value.

This messaging along with ideas such as per-use taxes are what the NBAA and others are fighting. You might look at a $100 per-use tax as not a big deal; however, when the government infrastructure is put into place to support this effort, they will find that $100 per flight is not enough to support the new bureaucracy, and once the tax is enacted, the government will then have the authority to raise it arbitrarily. You need NBAA fighting this stuff with strong words.

Don't forget the values aviation has brought our country for many years. Why do you think that the Air Commerce Act of 1926 was enacted to bring the newly formed Aeronautic Branch under the Department of Commerce? Because the writers new that aviation would go on to provide the infrastructure and conduit needed for interstate and international commerce. That means that aviation was seen to be a healthy and good thing for the country. I guess that has been lost.

President Obama's approach is clearly a class warfare ploy selected to alienate and divide. It has very little if anything to do with "fair share" taxation. It's an attempt to pretend he is identifying with "the little guy" while he has no qualms about taking Michelle to dinner in New York and incurring a huge taxpayer expense for all the supporting aircraft that had to accompany them along with Air Force One.

The owners of business jets (I own and fly a 32-year-old Citation 551, with no part of the expenses paid by my company - yes, I'm doing well after building my business over the past 31 years) are already paying taxes and fees through fuel taxes, property taxes, sales taxes, and through the taxes paid by those who receive their income from the operation of business jets (FBO's, insurance companies, etc.). Transportation is a key part of this country's infrastructure and GA is an important part of that infrastructure.

Let's drop the rhetoric and take a serious look at the numbers if you want to argue in favor of Obama's proposals with respect to GA.

You (the USA) are 13 plus or minus TRILLION dollars in overdraft (spending in excess of revenues or taxes collected) which is costing you a large amount of interest which, of course, adds to your yearly budget deficits.

Not to forget the current administration had to cover costs of the inherited wars
and tax cuts made by W. Bush's (Republican) administration.

The people (not President Obama) need to get out of this ginormous hole and
this requires EVERYONE to chip in, including GA. Enough said, except that the people must support the president in efforts to curtail government spending coincident with raising taxes.

A friendly reality check for those of you who are apparently not aware of citizenship obligations.

What's Obama's obligation? To encourage wealth envy, to disparage corporations? You know, while I appreciate that some respect government over the individual in their political view, but it is high time -- and this isn't just about Obama -- that the citizens be more obliged to say, "enough government, already!" and demand a reduction in government. This is NOT citizens' faults, except that we are largely disengaged in the process, like distracted sheep. There's a reality check.

This probably won't make me popular on this site but lets's think about some things.

First I am a former airplane owner (several), a person who has flown on company jets many times, and generally is quite familiar with the shortcomings of commercial aviation. I understand the value of having a robust domestic aviation industry with the jobs it provides.
As a person who benefitted greatly by the accelerated depreciation in 2005 when I purchased a new airplane, trust me I get that side of the argument. Preferential tax treatment changes behavior and stimulates economic activity, at least when it is truly preferential. It moves the timing of purchases creating additional demand and arguably additional jobs. But that can be said for backyard swimming pool construction also. Also auto purchases.

However, when the exception becomes the norm I am less convinced there is incremental value. When I compare that to alternatives and the impact of increasing the deficit, laying off teachers, delaying road and bridge repair, funding light rail, etc. I am not sure that the best and most fruitful use of the tax code is to permanently subsidize business aviation.

There are many other things where there is more bang for the buck and where the participants in the behavior will be much more responsive to the preferential tax treatment than will business aircraft purchasers.
In summary, if you need accelerated depreciation to justify the purchase of a private jet you probably don't really need a private jet.

Like I said, this is not going to win friends on an aviation web site and I am a very big fan of general aviation.

John B, I "chip" in to the governments problem when I pay my fuel taxes. I do not agree with the government bailing out companies that are supposedly "too big to fail". That is truly fiscal irresponsibility as there really is not such thing as too big to fail. If we would get out of the barbarian countries of the Asian continent then we would be a lot better off financially. GA use of airplanes for business is a tax deduction just like a car or building.
I doubt that your country is in any better shape, especially if you are European.

The unfortunate situation with this current President and administration is their ideology is borderline Communism. That’s why President Obama debated so poorly on the first debate, as his ideology was clearly a firewall to effectively debate regarding our countries successful capitalistic nature of how to improve our economy.

Business Aviation is required to ensure a thriving economy such as ours because of its efficient use of people and resources by this technology.

In addition, business aviation institutes innovation at the grass roots level of the business. When I started in the aviation business at an early age with my father whom worked on the Embassies of India, Iran and Afghanistan (I was a line boy there and worked up to Mechanics helper) on USAF Conair’s, we would do all sorts of innovative modifications on these aircraft that the airlines only dreamed of. After my 4 years in the Air force on B-52's, I happenstance into Business Aviation in the late 1970's and have been in it ever since. From 1980 to 1995, Business Aviation was far ahead of any airliner in cockpit avionics and interior furnishings. Lately with increased FAA regulation on part 91operations, this innovation is waning in my opinion. Top down Government regulation by incompetent bureaucrats

The reason I bring this up, is to make a point on how a top down government control of the economy through the regulatory process can affect success, innovation and prosperity and growth in a capitalistic economy.

This administration has repeatedly lambasted business aviation, because it represents the worst of what they truly believe is wrong with our society. Unfortunately, a lot of other people in this country agree with this administration (at least 45%) and we shall see at this next election cycle exactly what that percentage is.

What I find interesting, when I used to see the USSR’s Aeroflot Airliner/Military aircraft coming and going from the Ramps of Palm in Dehli, Merhabad in Iran, and Kabul Afghanistan, I only saw Politburo members enplaning and deplaning as passengers. The aircraft were at least 20 years deficient in technology and were always in a horribly dirty condition than the free countries airliners coming and going at the time. Their schedules could never be trusted as well…

If we continue on the path to Communism, that’s what we have to look forward to in aviation my dear Komrads!

1. Barack Obama was a social worker. Bereft of resume, business knowledge, or how the free market operates
2. BizJet owners didn't make current tax policy, congress did and had the option not to structure it the way it is
3. BizJets earn money or they are not operated-if the airlines could offer the speed and efficiency of a BizJet, business wouldn't need them
4. If we had a flat tax and a fair tax policy where business didn't shoulder over 80% of the tax revenue in this country sentence item #3 would still apply
5. Should General Aviation be forced into the same revenue scheme other less aviation oriented countries offer, then general aviation would be destroyed as we know it and that would be a shame considering item#1
6. Obama is a socialist, the United States is not
7. Obama considers successful business bad and the trappings that go with them bad unless that business is union or benefits BO directly

Barack Obama said disparaging remarks about his own tenure with Baskin Robbins saying he felt he was consorting with the enemy. That says all we need to know about this shallow empty suit with a big mouth. The best we can do now in my opinion is maintain what we have until we get a new administration.

Remember, this Obama, has not, against the law, produced a budget since he has been in office. Just how are we supposed to have the slightest bit of respect for him and or his misguided policy?

As far as I am concerned, Barack Obama is unqualified to sit a president period and anything he says has to be suspect as if emanating from pathological liar.

Yet, you "mostly like" him, while he's an utter rhetorical hypocrite -- unrepentant and repeatedly on this matter, not to mention others like it. So, who else has got a problem with irony as well as the president? You?

Regarding Ed's item 4 - the OMB numbers show total tax revenue for 2011 of 2.3 trillion. Of that, personal income tax provided 1.1T, and business tax provided .2T. That does not include Social Security and Medicare (shared equally by employers and employees). Social Security and Medicare taxes total .8T. Since those taxes are paid equally by employer and employee, the breakdown becomes individuals = 1.5T, business = .6T.

I think this is a good article. As a student sport pilot, I have seen the huge disparity in wealth between people who fly in luxury aircraft and ordinary people. I don't think it will send the aviation industry into a tail spin if these people pay a little more in this time of national need.

I agree that we all must help with the situation we are in, but the government has to start with balancing its own budget. I do not want one more dime of my money going to a government that is just going to keep wasting it. I am a pilot, not a wealthy individual. I could go on and on but the big elephant in the room is our government spends too much money, and until we fix that problem, not any amount of new taxes is going to fix the problem.

When Obama goes off teleprompter you hear the real man. His attacks on corporate aviation are simply because he is a communist, and jets represent the essence of both freedom and success. Like Stalin, he wants to be the only one with a jet, an SUV and a vacation house in Hawaii. Why should he care about 250,000 aviation related layoffs - they are all in safe Republican states - but his rhetoric can win over the uneducated, and possibly tilt the electoral balance in his favor.

Well folks, I am an insurance agent. We preach how to age gracefully... In a nursing home.
We tell everyone to spend down their assets so that they qualify for Medicaid. Medicaid is the only way for the 49% s to live in a nursing home and be treated as human. I don't think Mitt has that problem

Well folks, I am an insurance agent. We preach how to age gracefully... In a nursing home.
We tell everyone to spend down their assets so that they qualify for Medicaid. Medicaid is the only way for the 49% s to live in a nursing home and be treated as human. I don't think Mitt has that problem

Kudos to Mr. Burger for the courage to suggest we look past the rhetoric of well-heeled lobbying firms and corporate-funded aviation organizations, those who want to short-circuit any real discussion of how to fund the aviation infrastructure.

The current entitlement program for corporate-jet users, a fuel tax that comes no where near to assuring these affluent freeloaders pay their fair share for services incurred, has got to be revised to a higher percentage. Now.

The status quo, this preferential treatment, is un-american. Affluent freeloaders are not more American, not a higher class of citizen, there is no such constitutional category, and their time is not more valuable than that of any other citizen, not in the eyes of our government, which is still a democratic republic, so let's have an end to all the hogwash about how special and important and exceptional these corporate jet users are. That's fatuous self-promotion. Have any of these self-absorbed misfits heard the word “teleconference”, “Twitter”, “GoToMeeting.com”? The term “business travel” is an anachronism, a quaint twentieth-century notion, another example of corporate waste and inefficiency.

AOPA, the NBAA, and other pro-entitlement lobbies never admit that corporate jet flights are currently subsidized by the U.S. Taxpayer, and have been for far too long.

There is no rationale for this form of welfare. The recipients don't need it, have done nothing to qualify for it, and don't deserve it.

At any moment now we should hear howls of outrage from the political right about this unearned entitlement. Wait for it....

No, no, keep waiting....

Ah, but wait, the apologists say. Making these corporate jet users pay their fair share will reduce the number of flights they take, and hurt local airports and the local economies from which these jets operate.

So the implied threat is, “If you take away our entitlement, we're going to scream, stomp our feet, and hold our breath until you give in.” But mommy and daddy taxpayer cannot afford this indulgence anymore. Corporate-kid is going to have to pay for it using his allowance, the allowance from all the tax breaks he still receives. These kinds of tantrums are inevitable when you spoil a class of people. They threaten to hold you as economic hostages. Time to call the bluff and get on with making this government legislate for the wellbeing of all Americans, not just a select few.

If some aviation-related business or industry cannot thrive without a subsidy from hard working, middle class U.S. taxpayers, who pay taxes at a higher rate than those corporate jet users, that same business or industry is not viable, not a part of the real economy. It is instead a bubble economy.

Doesn't the idea that some privately-held corporations must depend on government largess to stay afloat somehow smack of- dare I say it- socialism?

So kiss your subsidy goodbye, my coddled corporate comrades, it's time to sink or swim. Nothing personal. Business is business, as you like to say. Time to finally shoulder the awesome responsibilities that come with taking entrepreneurial risks in a regulated free-market economy. That is, or at least it used to be, The American Way.

I laugh when I read respondents' claims that the current president is inciting class warfare. Class warfare, my friends, began when Reagan instituted welfare for the wealthy, decades ago. The need to even talk about User Fees is just one of the many consequences of that still-born notion of trickle-down economics. Class warfare? The wealthy have sequestered so much income that was once taxed to provide revenue for infrastructure such as Next-Gen, roads, bridges, defense, that if we had captured it when it was earned, all talk of deficit would vanish. Class warfare? The middle class is down for the count, and unless it demands that the affluent freeloaders pay what has been due for decades, you can kiss goodbye any hope that your children will inherit a functional economy, a functional democratic republic, or any kind of life, liberty, or chance to pursue happiness. It will all become commodities. Guess who will be selling it. Care to guess how much it will cost?

It's become popular, too, to criticize the current president for using Air Force One. The claim: it's a tremendous waste of taxpayer money. I'm sure these respondents were equally critical of Mr. Bush for this same abuse.

How are increased prices for aircraft going to be a good thing? And, how is taking this depreciation away going to HELP the reduction of federal overspending? Oh, it doesn't, it just adds a tiny bandage to the tax revenues of the gov. I see.

I wish some folks would stop trying to understand money, they just don't get it.

It's time to slaughter another sacred cow: this one is the whopper being foisted on us by the pro-entitlement crowd, those who believe the affluent-corporate clique deserve special consideration from the government. The topic: collecting User Fees.

Some of this ilk argue that the cost of implementing, administering and collecting the fees will absorb much of the fee itself. Not so: the FAA addressed this right-wing myth during the Bush Administration.

That's not a misprint. Mr. Bush nominated the FAA administrator, Marion Blakely, who served at the pleasure of the president. She signed off on the FAA release quoted below.

“FAA is confident that we can collect fees at minimal administrative cost to the FAA and the users of the system. Not only is this the case with service providers around the world, but the FAA has a good track record in this area; the administrative billing and collection processes for overflight fees have gone extremely smoothly.

Based on best practices from the U.S. and around the world, the administrative cost would be significantly less than 1 percent of the anticipated revenue.

The fact that fewer than 500 users would account for 95 percent of the billable flights presents opportunities for significant efficiencies in the billing and collection process. GA pilots will see no air traffic user fee bills if they do not use the 30 large hub airports.”

Now when your readers from the political right peruse and absorb these tidbits approved by the Bush Administration, they will blush with embarrassment that they ever indulged in any conspiracy theories, wild speculation or outright lies about costs associated with administering and collecting User Fees. How quickly one can “forget” that the FAA already collects overflight fees. It's one of those inconvenient truths that deflate overheated rhetoric, lies of omission and calculated misdirections and misrepresentations.

There's 18000 pages of tax code. 17500 of them for 5% if the people.......why do you think people with big money have Florida residencies.....no state tax.....that's also why they have airplanes....to spend 183 days out side of where they are from... they don't spend 183 days in Florida...just weekends....so all of their other travel also counts as days out of state.....why do you think the corporate jets leave Florida in the evening on Sundays during season...because you get to count Monday as a transit day.....towards your 183......the average population can't use 99% of the tax code.....how is that ever going to work.... so let's have a war for oil....let's aall become Florida residents even though we'll only spend weekends there...let's burn up the worlds oil supply, to maintain our tax breaks...let's set the markets on the weekend at our mansions.....oh.....wait.....we already did all of that........crap.....what now....

There are 18,000 pages of tax code....17,500 written for 3% of the population....big money looks at taxes, taxes, and taxes.....why do you think the wealthy use their jets to go to Florida for weekends.....they're typically Fl residents, maintaining their residency requirements....not that they spend half the year in Fl...they just need to spend half a year outside of their own state.....the jets line up on Sunday evening in Florida to go back to where ever they're from....let's not leave until Sunday night....that way we get to count Monday too.....maybe we can set the markets at our mansions for when the market opens on Monday morning....you know do all our CDL trading on Sunday....get a step ahead of the game.....that way we all know what to do on Monday when the market opens.....so let's have a war for oil so we can keep this operation going.........oh, wait.....we already did that.....crap, what now?

Mr. McKillen has no idea how the aviation system works. The atc system as it is now used was set up due to 2 airliners colliding over the grand canyon in the early sixties. There has never been a collision of corporate aircraft. Airliners always get first come, first served because they have a dispatch staff that files flight plans days ahead of when they are used. Everyone else gets whatever is leftover. Think that corporate jets are overloading the system? Try checking out DCA during rush times or when weather is bad. The only corporate jets or other turbine aircraft that go into DCA on a regular basis are government aircraft due to the crazy TSA rules and yet the FAA still has to issue edict times to regulate airliner departure and arrival times. Still don't believe me, you should check out the departure delays that happen in Teteboro when the weather is bad. Aircraft get released out of TEB to fit into gaps in airliner traffic out of the New York area, not the other way around. With the FAA's wonderfull past record of budget mismanagement do you really think the FAA could run a user fee program that efficiently? Once you open the door on user fees for the "rich corporate jet" owners it is only a matter of time before it spreads to eveything else in aviation in the US. Don't believe that then check on the NRA's record on lobbying. They learned the hard way on giving in on selective issues. If more funds are needed then increase the fuel tax. That has a proven record and does not require any further government involvement.

New item in follow up to a previous posting I made and comments I read;

I presume we are all open to frank discussions when I write the following;
I think that most will agree that the USA is lumbering itself with having declared itself the "policeman" of the world "to "save ourselves" from being attacked and to defend democracy etc). That cost an enormous amount of money that needs to be paid by the taxpayer. Somehow this came about after WW2, which took Pearl Harbour to make a committment to go to war with the Germans and Japanese .
If Obama (Democrats) would introduce a policy of reducing the civil service and military (reduce government spending) and let other countries sort out their own problems,
I would wager a safe bet that the Republicans would fight it tooth and nails, all to the benefit of the top earners in the country who are also the most interested in keeping the defense industry supplied in orders and have a serious interest in providing enough "enemies" to the Nation to keep the ball rolling. Not to forget the fact that most of the money spent on defense could accellerate replacement of fossil fuels and dependance on the oil cartel.
If Democrats would introduce a stop on foreign money investments for purposes of tax evasion he would be attacked viciously by the Republicans.
If Democrats want every citizen of the USA to pay his/her share of the income they receive he's attacked by the Republicans, but......................
When Obama did away with Bin Laden silence from the Republicans
When Obama gave all Americans access to Medicare and doing away with sending untold numbers of citizens into bankruptcy, outcries of communist and dictator from the Republicans, because, as is alleged, the insurance companies need to change their policies of refusing bad risks etc.
What on earth do Americans want, if not a peaceful existence moderated by what you can realy efford and not by how much you can stack on to your borrowings piling up the National debt ? ? (16 trillion according to my last information) This goes for every Nation who are under the strains of severe overdrafts ! Do you realy think this can on ad infinitum? USA is up for sale to other interests as is shown by China's share of the National debt !
As someone witnessing this from outside, I cannot but observe that the modus operandi of most of the the Republicans is " I am all right and screw the rest of you" attitude ! Is that the relationship you cherish between citizens?
It takes more than a saint to get the lot together in straightening out the situation you're in. Co-operation rather than outright filibusting would be a good start.

I closed my aircraft sales business after the last election. I have struggled far too much the past few years. I am proud to say that by working several part time the past few yers I was able to operate my business on cash so I am not going bankrupt, but it is not worth it anymore. Our fearless leader whom enjoys the priviledge of private aviation has left me stupified, discouraged, and indignant with his remarks during and after the election about corporate jet owners needing to ante'-up and pay more taxes for flying private. So now I am struggling to make it as a full time employee in a new industry, working 3 part time jobs again, my wife is working full time in a new career as well, and our children just keep getting juggled to and fro. If it weren't for corporate jet owners/companies I wouldn't have made a living selling aircraft the past decade. I am thankful for them.